I founded Endpoint Technologies Associates, Inc., an independent technology market intelligence company, in 2005. Previously, I was vice president of Client Computing at IDC, covering client PCs (desktop and mobile computers). Before that, I ran my own research and analysis firm, directed operations for a developer of multilingual text processing software, ran a technology analysis and publishing practice for a consulting company, managed international accounts for a data communications equipment manufacturer, and did new product development for a computerized trading network. I have published in a variety of forums and been quoted in a number of publications and other media outlets. I snagged a B.F.A. from Bennington College and an MBA from the University of Chicago Graduate School of Business. I am multilingual, world-traveled, and have bicycled over the Alps, but am now a family man.
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Segmentating On Fear And Lust

The IdeaPad Yoga 13 has many innovative elements but retains some of the design language of the traditional ThinkPad

Last week, a small group held court in a hotel conference room along the concrete boulevards that have long since replaced the placid beaches of Hollywood, Florida. We were gathered for the annual Lenovo industry analyst conference. Company executives had flown in from Beijing, Lenovo’s headquarters in China, as well as from Raleigh, where U.S. operations are based, and analysts had come from all over.

This council has been meeting for decades, if one grants that it is essentially the same under Lenovo as it was under IBM, which sold its PC division to the Chinese company in 2005. In fact, the hallowed powwow was the first of its kind in the 1980s, and a few of the analysts and some of the employees date all the way back to those heady years. Back when margins on PCs were high, it was not unusual to throw in a day of skiing as an extra. Now, it’s pretty much fly in, huddle for a day and a half in some modest venue, and fly out.

Of course, most of what goes on in the room is under non-disclosure. Company executives feel comfortable revealing what’s bothering them, future plans, and potential directions because they know and trust this group of familiar analysts, who can be highly critical behind closed doors but remain circumspect in public.

And I won’t tell you anything out of school here.

But I will talk about a subject that I think is of general interest, a topic that arises out of an interesting Lenovo dilemma.

When Lenovo bought the IBM PC division, the Chinese company sold pretty much just PCs in China. IBM had established ThinkPad notebooks in large enterprises around the world, but hadn’t done well with consumers or small businesses. Since then, the company has diversified into other products, notably phones, where it is now number two in China with its line of smartphones running Google’s Android. And it is moving into consumer markets outside China with a line of PCs under the moniker “Idea.”

The company is doing pretty well, as evidenced by its capture this year of the top spot in PCs from Hewlett-Packard (HP). Although research firms Gartner and IDC were split on which vendor was actually in first place, the momentum of both companies makes it clear that Lenovo’s leadership will be established more definitively when 4Q12 results are in.

So, it is from a position of strength that Lenovo can contemplate the work yet ahead.

First, it should be acknowledged that the PC market is not the barrel of joy it once was. Competition is fierce, margins are low, and the buzz has migrated to “high-mobility” markets (e.g. smartphones and tablets). To address this phenomenon, Lenovo has inaugurated a “PC Plus” strategy, the centerpiece of which is a line of smartphones. After a market trial two years ago with one phone in China, the company introduced a whole lineup of phones last year in China, and in the past few months has started selling phones in Russia, India, Vietnam, Indonesia, and the Philippines.

Second, there is the issue of staying on top. If one looks at the historical trend, no PC maker has ever maintained a market share above 20%, and most keep their top rank for only a few years. In the 1980s, IBM was king, then Compaq took the crown through the late 1990s, then Dell held the position from 2001 through 2006, only to be supplanted by HP, which is now in turn being replaced by Lenovo.

Third, although Lenovo has gone a long way toward blending its Chinese and American assets, the consumer market outside China — particularly in North America — remains stubbornly beyond its grasp.

As the council rolled on, I got to thinking about Lenovo’s segmentation strategy and why it’s not doing so well here in the United States. The brand that works here is ThinkPad, bought from IBM. ThinkPad is a solid commercial mark, well known among corporate IT buyers. The consumer brand, IdeaPad, borrows from ThinkPad the “Pad” part, which refers to a notebook, and is supposed to convey something forward-looking with “Idea.”

But neither Idea nor the master brand, Lenovo, has gained much traction here in the United States. The value of “Pad” has been absorbed largely by Apple, with its iPad, and the desktop suffix, “Centre” (with its British spelling), works only with ThinkCentre, the commercial desktop brand. IdeaCentre is virtually unknown on these shores.

Segmentation should be easier than this. There are really only two primary human motivators: fear and lust. All people harbor both, but in some one rules more than the other. To someone primarily motivated by fear, change is anathema. To someone motivated by lust, stability is boring.

Lenovo itself has built a version of lust and fear into its overall strategy: attack and defend. It defends markets, like China and enterprise notebooks, that it fears it might lose. It attacks in others, like developing geographies and U.S. consumer, that it lusts after.

Corporations are conservative, in some sense motivated mostly by fear. Many younger people are eager for change. Thus, one can map lust onto innovation and fear onto predictability.

From there, it’s a short step to segmentation. Large corporations like stability. Many consumers are drawn to innovation.

Thus, ThinkPad is doing what it should do: delivering a product, year in and year out, that touches on the same design elements: black, squared off, and so on. Technologies are updated, but the look and feel remains.

Idea is then free to innovate, to try modern designs, to reach out for something new and exciting.

Lenovo will continue to grow based on its existing strategy of PC Plus and expansion into developing markets. But getting Idea right could turbocharge the attack vector.

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